Vertical Integration and Diversification

What do firms prioritize to grow?

• Product Quantity and Quality

• Customer base and customer service

• Profit and shareholders' returns

• Research and develpment

What is the reason for a firm to 'make' a product rather than 'buy' it?

• Costs (inhouse) > Costs (market)

• Costs (inhouse) < Costs (market)

• Costs (inhouse) = Costs (market)

• Costs (inhouse) fluctuates

____ is a form of vertical integration done by expanding business up the supply chain.

• Backward vertical integration

• Forward vertical integration

• Lateral integration

• Horizontal integration

A coffee farmhouse expands its business to include a coffee shop selling directly to customers. This is an example of _____

• Diversification

• Lateral integration

• Backward vertical integration

• Forward vertical integration

A firm that adopts backward and forward integration plus reliance on outside firms adopts ____

• Backward vertical integration

• Forward vertical integration

• Taper integration

• Strategic outsourcing

A firm that increases the variety of its products/services and is active in several product markets adopts ____

• Vertical integration

• Strategic outsourcing

• Geographic diversification

• Product diversification

____ is an example of unrelated diversification.

• Conglomerate

• Additional business activity

• Low level of diversification

• Expanding business competition

____ is a source of value creation for related diversification.

• Price competition

• Economies of scope and scale

• Low level of diversification

• Product quality

A firm that wishes to decide which business unit to expand or divest, can use the following analysis framework.

• Pestel Analysis

• BCG Matrix

• Porter's 5 forces

• Global strategy

A way to allocate capital and maximize profits by dispersing money to other sections of the company

• Vertical integration

• Strategic outsourcing

• External capital market

• Internal capital market